Global law firm Baker McKenzie secured an approximately USD 60 million award, plus attorneys’ fees, for Arxada Holdings NA Inc., a portfolio company of private equity firms Bain and Cinven, after a three-day trial in front of Vice Chancellor J. Travis Laster in the Delaware Court of Chancery. The result is a significant victory in a dispute centered on Defendants’ trade secret theft and breach of the business sale-noncompetition provisions contained in a USD 450 million Stock Purchase Agreement Arxada executed with Enviro Tech Chemical Services, Inc. (“Enviro Tech”) and its founder, Michael Harvey, in December of 2021.
In July of 2024, Arxada sued Michael Harvey, his nephews Aaron Harvey and Phil Harvey, their business Capacity Chemical LLC, and BlueTech Laboratories, Inc., a chemical company purchased by Michael Harvey after his sale of Enviro Tech to Arxada. Less than a year later, after obtaining a preliminary injunction against Michael Harvey, Arxada presented its evidence at trial in Delaware’s Court of Chancery.
The Court has now issued its opinion, available online, awarding Arxada permanent injunctive relief and its attorneys’ fees in addition to judgment of approximately USD 60 million, including compensatory damages, exemplary damages, and prejudgment interest. The Court has found: “After [Arxada] took over, the founder disagreed with the new direction. He advised customers on how to obtain better terms from the company. He also laid the groundwork to compete with the company. . . . After learning of his impending termination, the founder coordinated with his two nephews, who held senior roles at the company. Together, they downloaded massive amounts of information, including the company's most important trade secrets. The nephews resigned, and the founder arranged for them to receive 4 million to start a competing business.”
This decision arrives at a pivotal moment for restrictive covenants in the United States. While noncompete and non-solicitation clauses in the employment context have been subject to heightened scrutiny in recent years, Delaware courts continue to recognize that broader restrictions are permissible in the context of business acquisitions, where such covenants protect the goodwill that buyers pay substantial sums to acquire. The Court of Chancery’s decision reaffirms this principle and vindicates Arxada’s bargained for contractual rights while protecting its valuable trade secrets.
Baker McKenzie represented Arxada with a litigation team led by Michael Duffy and including Colleen Baime, Michael Lehrman, Crofton Kelly, Brian Bornhoft, and Jenny Costello. For their work on this case, the trial team was recognized as runner-up in Law.com’s prestigious “Litigator of the Week” column, available on the Law.com website.
The Firm's experienced trial lawyers manage high-stakes trials and bet-the-company litigation in courts across the country. Baker McKenzie's litigation team has deep experience representing acquirers and sellers, including public companies, private equity firms, and portfolio companies, in complex litigation and post-acquisition disputes, including claims involving breaches of fiduciary duties, representations and warranties, earnout disputes, restrictive covenant enforcement, fraudulent transfer, and trade secret misappropriation. The team brings formidable trial skills to every engagement, with a proven track record of delivering results when the stakes are highest. Whether protecting the value of a transaction, enforcing contractual commitments, or defending against allegations of breach, Baker McKenzie's litigators combine rigorous preparation, creative strategy, and courtroom excellence to achieve favorable outcomes for clients in their most consequential matters.
In July of 2024, Arxada sued Michael Harvey, his nephews Aaron Harvey and Phil Harvey, their business Capacity Chemical LLC, and BlueTech Laboratories, Inc., a chemical company purchased by Michael Harvey after his sale of Enviro Tech to Arxada. Less than a year later, after obtaining a preliminary injunction against Michael Harvey, Arxada presented its evidence at trial in Delaware’s Court of Chancery.
The Court has now issued its opinion, available online, awarding Arxada permanent injunctive relief and its attorneys’ fees in addition to judgment of approximately USD 60 million, including compensatory damages, exemplary damages, and prejudgment interest. The Court has found: “After [Arxada] took over, the founder disagreed with the new direction. He advised customers on how to obtain better terms from the company. He also laid the groundwork to compete with the company. . . . After learning of his impending termination, the founder coordinated with his two nephews, who held senior roles at the company. Together, they downloaded massive amounts of information, including the company's most important trade secrets. The nephews resigned, and the founder arranged for them to receive 4 million to start a competing business.”
This decision arrives at a pivotal moment for restrictive covenants in the United States. While noncompete and non-solicitation clauses in the employment context have been subject to heightened scrutiny in recent years, Delaware courts continue to recognize that broader restrictions are permissible in the context of business acquisitions, where such covenants protect the goodwill that buyers pay substantial sums to acquire. The Court of Chancery’s decision reaffirms this principle and vindicates Arxada’s bargained for contractual rights while protecting its valuable trade secrets.
Baker McKenzie represented Arxada with a litigation team led by Michael Duffy and including Colleen Baime, Michael Lehrman, Crofton Kelly, Brian Bornhoft, and Jenny Costello. For their work on this case, the trial team was recognized as runner-up in Law.com’s prestigious “Litigator of the Week” column, available on the Law.com website.
The Firm's experienced trial lawyers manage high-stakes trials and bet-the-company litigation in courts across the country. Baker McKenzie's litigation team has deep experience representing acquirers and sellers, including public companies, private equity firms, and portfolio companies, in complex litigation and post-acquisition disputes, including claims involving breaches of fiduciary duties, representations and warranties, earnout disputes, restrictive covenant enforcement, fraudulent transfer, and trade secret misappropriation. The team brings formidable trial skills to every engagement, with a proven track record of delivering results when the stakes are highest. Whether protecting the value of a transaction, enforcing contractual commitments, or defending against allegations of breach, Baker McKenzie's litigators combine rigorous preparation, creative strategy, and courtroom excellence to achieve favorable outcomes for clients in their most consequential matters.
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